APR Calculator
The true annual cost of a loan once fees are included — the figure that makes two loans comparable.
A quoted interest rate ignores fees.
How the apr calculator works
A quoted interest rate ignores fees. APR does not: it is the rate at which the payments you actually make discount back to the money you actually received, so an establishment fee raises it even though the interest rate has not moved.
That is the whole point. A loan at 6% with 2,000 in fees can cost more than one at 6.5% with none, and only APR shows it.
One caveat regulators are explicit about: APR assumes you run the loan to full term. Pay it off early and fees are spread over less time, so the effective cost is higher than the quoted APR — which is why the advertised figure always names the example loan it was worked out on.
Formula: the rate at which Σ payments/(1+r)ᵗ equals the amount advanced net of fees
Worked examples
| Inputs | APR | Note |
|---|---|---|
| 300,000 at 6% over 25 years with 2,000 in fees | 6.3002% | APR above 6% |
| The same loan with no fees | 6.1678% | APR equals the effective rate |
| A small loan where fees dominate | 20.1314% | APR far above 10% |
FAQFrequently asked questions
What is APR?
The annual rate at which the payments you make discount back to the money you received — the interest rate with fees folded in.
Why is APR higher than the interest rate?
Because fees are part of the cost of the loan but not part of the interest rate.
Does every market define APR the same way?
The idea is the same everywhere — one figure that folds fees into the rate so two loans can be compared. The precise rules, and sometimes the name, are set by the regulator named below.
Does APR assume I keep the loan to term?
Yes, and that matters: repay early and the up-front fees are spread over less time, so your real cost is higher than the quoted APR.
Does APR include everything?
No. It includes fees required to get the credit. Optional insurance, late fees and break costs sit outside it.
Where these figures come from
- CFA Institute — Quantitative Methods: The Time Value of Money — the discounting, annuity and IRR conventions used here
- US Federal Reserve — Regulation Z (Truth in Lending), APR calculation — why APR includes fees where a nominal rate does not
- ASIC MoneySmart — the Australian regulator's own consumer calculators
Last checked: September 2026. These are the standard textbook formulas; the conventions named are those of the CFA Institute curriculum and ISO 80000 usage.